Unchanged lending rates pull down equity markets (Weekly Review)

Mumbai, Feb 6 (IANS) Disappointment over the status-quoist stance of the Reserve Bank of India (RBI), coupled with a weak rupee and volatile crude oil prices, depressed the Indian equity markets during the just concluded weekly trade.

The Indian equity markets ended the week under review marginally in the red, as heavy losses at the start of the week offset the gains made during the last two sessions.

Investors during the first three sessions were cautious largely on account of global headwinds.

The barometer 30-scrip sensitive index (S&P Sensex) of the Bombay Stock Exchange (BSE) closed lower by 253.72 points or 1.02 percent to 24,616.97 points.

Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) lost 74.45 points or 0.98 percent to 7,489.10 points.

“Continued slump in crude oil prices, worries of further slowdown of the Chinese economy and dismal earnings of key corporate dragged indices lower by about one percent in the week gone by,” Gaurav Jain, director with Hem Securities told IANS.

“However, buying interest from lower levels, bounce back in crude oil prices and hopes of passing GST (Goods and Services Tax) Bill in the upcoming budget session of parliament supported the indices cut the losses to some extent.”

Besides, investors were seen disappointed after the RBI decided to keep key lending rates unchanged during its bi-monthly monetary policy review held on February 2.

“Disappointment from the RBI’s monetary policy review, a weak rupee and concerns over the government’s ability to perk-up investments subdued markets in the initial sessions of last week,” Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.

“Global markets were rattled by weak oil prices, earlier in the week, this provoked central banks’ monetary policy measures to ease volatility.”

Vaibhav Agarwal, vice president and research head at Angel Broking, said: “Energy and realty index took a beating this week, while telecom and FMCG stocks witnessed some buying.”

“BSE metal recouped its losses after reports that the government is considering a minimum import price for steel products.”

Nitasha Shankar, vice president for research with YES Securities, specifically cited that banking index came under severe pressure as PSU banks continued to slide southwards.

“IT indices were gainers for the week, while pharma, metal, media and auto indices ended with deep cuts.”

Sector-wise, investors were unnerved by pharma industry which reacted negatively to rumours on US curbs on Indian pharma companies.

“But, Lupin results and smart recovery in the stock was one of the key highlights of the week as such,” pointed-out Pankaj Sharma, head of equities for Equirus Securities.

Metal and mining stocks pared their losses as copper prices rose in global commodities markets.

In addition, volatile crude oil prices flared volatility through-out the week under review.

“Crude prices continued to see extremely volatile — ups and downs — which influenced the market sentiment,” Sharma told IANS.

Dhruv Desai, director and chief operating officer at Tradebulls, noted that crude oil’s re-conquering of the $30 mark on short covering later in the week gave a boost to the domestic market sentiments.

Furthermore, the rupee’s continuous slide prompted by foreign investors’ selling frenzy kept investors cautious.

“Global events from China, US, and the Middle-East have affected our domestic equities and rupee,” Hiren Sharma, senior vice president, currency advisory at Anand Rathi Financial Services, told IANS.

“FPI (Foreign Portfolio Investors) outflows especially from January 2016 has led to equity corrections in which we witnessed a new low at 68.25 (lowest since Aug 2013).”

On a weekly basis, the rupee strengthened by 14 paise at 67.64-65 (February 5) to a US dollar from its previous close of 67.78-79 to a greenback (January 29).

Nevertheless, the Indian rupee remained weak through-out the period under review. The weakness in the India rupee’s value indicates the massive outflow of foreign funds from the equity and debt markets.

The National Securities Depository Limited (NSDL) figures showed that the FPIs (Foreign Portfolio Investors) bought Rs.2,568.58 crore or $379.87 million in the equity and debt markets from February 1-5.

In contrast, data with stock exchanges disclosed that the FPIs sold stocks worth Rs.940.71 crore in the week under review.

Conversely, the data showed that DIIs bought stocks worth Rs.232.75 crore.

However, markets made some gains at the fag-end of the week on account of short-covering and value buying. Reversal in crude oil and rupee’s downward trajectory supported the relief rally.

(Rohit Vaid can be contacted at rohit.v@ians.in)

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